Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Strattec Security Corporation (NASDAQ:STRT).
Hedge fund interest in Strattec Security Corporation (NASDAQ:STRT) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Natural Health Trends Corp. (NASDAQ:NHTC), Amtech Systems, Inc. (NASDAQ:ASYS), and Applied Genetic Technologies Corporation (NASDAQ:AGTC) to gather more data points. Our calculations also showed that STRT isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_375529" align="aligncenter" width="450"] Mario Gabelli of GAMCO Investors[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. With all of this in mind let's take a look at the new hedge fund action encompassing Strattec Security Corporation (NASDAQ:STRT).
How are hedge funds trading Strattec Security Corporation (NASDAQ:STRT)?
At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards STRT over the last 17 quarters. With the smart money's sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Mario Gabelli's GAMCO Investors has the number one position in Strattec Security Corporation (NASDAQ:STRT), worth close to $5.7 million, amounting to less than 0.1%% of its total 13F portfolio. On GAMCO Investors's heels is Ariel Investments, led by John W. Rogers, holding a $4.8 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions comprise Renaissance Technologies, Gavin Saitowitz and Cisco J. del Valle's Springbok Capital and . In terms of the portfolio weights assigned to each position Ariel Investments allocated the biggest weight to Strattec Security Corporation (NASDAQ:STRT), around 0.06% of its 13F portfolio. GAMCO Investors is also relatively very bullish on the stock, earmarking 0.05 percent of its 13F equity portfolio to STRT.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's also examine hedge fund activity in other stocks similar to Strattec Security Corporation (NASDAQ:STRT). We will take a look at Natural Health Trends Corp. (NASDAQ:NHTC), Amtech Systems, Inc. (NASDAQ:ASYS), Applied Genetic Technologies Corporation (NASDAQ:AGTC), and Global Ship Lease, Inc. (NYSE:GSL). This group of stocks' market valuations are closest to STRT's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NHTC,5,8269,-3 ASYS,7,21296,0 AGTC,9,9346,4 GSL,11,22635,8 Average,8,15387,2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $15 million. That figure was $12 million in STRT's case. Global Ship Lease, Inc. (NYSE:GSL) is the most popular stock in this table. On the other hand Natural Health Trends Corp. (NASDAQ:NHTC) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Strattec Security Corporation (NASDAQ:STRT) is even less popular than NHTC. Hedge funds clearly dropped the ball on STRT as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on STRT as the stock returned 17.5% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.